Hidden cost of state’s liquor regime estimated to raise prices by up to 6.3 percent, potentially more than doubling Michigan’s state sales tax for liquor

MIDLAND — As Gov. Rick Snyder’s Liquor Control
Advisory Rules Committee meets today
for the first time, a statistical analysis
being released by Mackinac Center policy experts indicates that liquor prices
are higher in Michigan and in the 17 other states where government acts as a
statewide liquor wholesaler. According to the analysts’ calculations, a
representative bottle of spirits — a fifth of J&B Scotch — cost almost
$1.59 more on average in liquor control states like Michigan than in other
states, amounting to a substantial hidden tax on a commodity already subject to
large state and federal taxes.

“We found that liquor control states had a
statistically significant higher liquor price — an average of 6.3 percent
higher,” said Todd Nesbit, Mackinac Center adjunct scholar and co-author of the
analysis. “This figure was arrived at after considerable care. We used 10 years
of nationwide price data and controlled for the effects on state liquor price
of everything from unemployment rates to demographics to employment in the
manufacturing and leisure industries.”

“These findings provide a measure of how much
state alcohol policies routinely empty the wallet of average consumers,” said
Michael LaFaive, co-author of the analysis and director of the Mackinac
Center’s Morey Fiscal Policy Initiative. “Michigan liquor consumers may
essentially be paying their 6 percent general sales tax twice — in fact,
more than twice — without even knowing it. But state and federal liquor taxes
are already huge. And honestly, would voters really stand for a sudden doubling
of the state’s sales tax if it were proposed in the plain light of day, rather
than hidden in an incomprehensible regulatory regime? The new state liquor
control advisory committee should consider that as they begin today.”

The 21-member state advisory committee meets for the
first time this afternoon to perform a comprehensive review of the state rules
and regulations governing alcohol traffic in Michigan. The committee is charged
with providing recommendations for reforming Michigan’s liquor control system,
which was first implemented following the end of Prohibition in the 1930s.

LaFaive also notes that a 6.3 percent increase
would amount to considerable consumer dollars statewide in light of
Michiganders’ millions of liquor purchases every year. According to the state
Liquor Control Commission’s 2009 Revenue, Sales and Licensing Statistics
report, some 6.7 million
cases of liquor were sold in Michigan in fiscal 2009 at a cost of more than
$940 million.

“Other studies suggest that there is no
statistically significant difference in binge drinking and total
alcohol-related fatalities between states that do and do not control liquor
wholesaling,” added LaFaive. “We don’t appear to be buying anything with these
higher prices. That’s why we recommend that the state get out of the liquor
wholesale business.”